The New Digital World

I include in this post parts of a chapter from a book I wrote in 2002 but I never published because I thought it was early for it. A have made some editions to the original material.

Chapter 5
The New Digital World

The digital world has emerged due to the wish of human beings to go beyond the immediately given, explore, understand and control physical reality. In the course of events to follow in the first decades of this new millennium, humanity will experience the effects of digital revolution in the economic, social and political structure of society. The longer–term effect will include a diminishing human involvement in decision processes and all major functions of the society will be converted to digital.

The major driving force behind the worldwide spread of digital technology is Globalization, which in turn is facilitated, to a large degree, by the synergy of the World Wide Web and Digital Economics. An understanding of the dynamics and parameters of digital revolution is essential for the survival of humans and their future prosperity.

The Coming Financial Crisis

The transformation of traditional Economics in such a way as to be possible to finance the digital revolution for an extended period of time leads to the concept of Digital Economics. The mechanism for the transferring of resources to facilitate the digital revolution is simple in principle and its effects are also simple. Business owners invest in computers and automation products because they want to decrease labor cost and increase their own share in labor output. If a small company has 10 employees but can reduce that number to just 5 by using digital technology then, labor cost decreases and by the fact that 5 people are only needed, the participation of the owner in labor output is increased since now the computers are considered as capital ownership. Now let us imagine the situation when computers replace all 10 people. In this case, the owner of the businesses not only owns the shares of the company but the labor force also. Of course, the labor is done by computers, which are owned, as opposed to workers who cannot be owned unless they are slaves. Computers work around the clock, demanding no pay raise and medical benefits while forming no unions.

In essence, the modern slaves are the digital computer automation systems and businesses are buying them by borrowing funds they’re hoping to repay through labor output. In the meantime, more and more people are losing their jobs as a result of the digital revolution and its automation applications. Those people must borrow increasingly in order to survive. The effect is the squeezing of earning of the working population in favor of those who do not earn wages. This also leads those that earn wages to borrow in order to maintain their standard of living. In the meantime, more labor is transformed to capital, that is in the ownership of the digital machines and automation. The earnings on the capital are used to buy more capital and increase the output. This finances the production of more computers and related automation technology. Instead of the earnings being distributed to the “slave laborers” in the form of stock ownership or cash dividend, they are used as collateral to issue credit to those not earning sufficient wages, such as department store credit cards. This must be done in order to maintain a demand for the goods produced by computers. Issuing of credit cards was the first step in the transformation to a digital economy. Digital money is the current stage and down the road physical currency will be totally replaced by it.

Digital products cause a reduction in tax revenues due to a decreasing labor force and in the purchasing power of money, resulting in an increasing public and private sector debt. A second wave of digital revolution may cause a major financial crisis in the western world and parts of Asia. The inability to further squeeze the wages of a decreasing labor force in favor of those not earning wages will cause the debt to explode, the financial markets to crash and, more importantly, cause major social and political issues to emerge.

The impact of digital technology on the human social structure is profound even in nowadays. An ever increasing number of people prefer to spent their time in Internet chat rooms and talk with other people around the world, even falling in love with someone they have never seen in person. The fact is that digital technology gives an opportunity of creating a virtual world that operates on own terms and conditions. This appeals to many people and they attempt to take advantage of it. But that is only a minor aspect of the current social impact of the digital revolution. The major aspect is the coming clash of civilizations. The clash of civilizations will be between the digital civilization and the human civilization: those who embrace and support digital technology versus those who think that humans should retain a more traditional life style, refraining from exuberant use of technology and should rely on human manual labor as the basis for measuring the productivity of the economy.

The economic strains caused by the digital revolution will be manifested in a need for a final conflict between those supporting it and those opposing it. Politicians will be called to take a stand and enforce legislation to limit the impact or even the growth of digital technology itself, a short of a “New Deal”.